11 leading Indian banks join hands to launch blockchain-linked lending for SMEs
While there is still uncertainty surrounding the fate of cryptocurrencies in India, blockchain is making its presence felt in the financial arena. In an attempt to fight defaulters and bad debts, 11 Indian banks which include some of the heavyweights like ICICI Bank, Axis Bank, Kotak Mahindra Bank, and HDFC Bank among others have joined hands to launch the first country’s first blockchain-linked funding for small and medium enterprises (SMEs), according to a report by The Economic Times. This move is expected to bring a paradigm shift in the lending process to small firms.
Yes Bank, Standard Chartered Bank, RBL Bank, and South Indian Bank are also part of the consortium. As per the report, IndusInd Bank, State Bank of India and Bank of Baroda are participating as outside members.
Speaking about the consortium, Abhijeet Singh, head of business technology at ICICI Bank said, “The idea of having such an organization is to remove any communication hurdle among the different banks. A blockchain network can only thrive if the entire ecosystem is working in synergy through a single network.”
A consortium by the name of Blockchain Infrastructure Company (BIC) is the entity that is driving this initiative and mediating the discussing between the participating members.
Representatives from the banks have already met earlier to chart out a path that would go a long way in making supply-chain finance more secure.
The network will provide lenders with details of the details of the credit data thus making the whole process much transparent and less risk-based.
Speaking about the MSME sector, Viral Acharya, Deputy Governor of RBI, said, “ Credit penetration is low for the micro, small and medium enterprises (MSME) sector where the ticket size is generally believed to be between Rs 10 lakh and Rs 1 crore.”
Bankers hope that with the help of this initiative, they will be able to draw more SMEs in the formal credit system and a network promoted by the large lenders is likely to become the focal point of the blockchain system.
Speaking about the prospects of this initiative, Vivek Belgavi, PwC fintech consultant, said, “A blockchain is a synchronized distributed ledger where data entry by any member is visible to all the stakeholders in the supply chain but the data entered at any point is immutable.”
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